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Wednesday, January 19, 2011

Strategic Tax Exemptions Will Boost High Technology Sector: IAMAI

New Delhi: Internet and Mobile Association of India (IAMAI) is of the view that strategic and well-thought tax exemptions will boost high technology sectors like digital and mobile value added services. IAMAI has made a near-impossible demand for tax exemption under Section 10(A) of the Income Tax Act for Internet and mobile service providers, mobile content providers, mobile value added services (VAS) platform providers and transaction providers on Internet and mobile platforms.

A similar tax exemption to the software and telecom sector about ten years back had given them the requisite incentive to grow to the current status. IAMAI believes that government intervention in the form of such fiscal benefits will help propel the digital industry to grow. It feels that unless incentives are given to the digital content providers and VAS industry, broadband penetration would not take off the way it has been envisioned by the Government of India.

“The income tax exemption granted software and telecom sectors have ensured that they have the necessary government support to scale up and achieve global size. A similar measure is needed for the digital content providers to ensure that e-penetration takes off in India and we have large successful companies that will carry forward the India brand,” said Dr Subho Ray, President, IAMAI.

Among other suggestions, IAMAI also sought a five-year moratorium on service tax on online services and online advertising industry under Section 65 of the Income Tax Act. It believes that a moratorium will allow this nascent industry to grow and stabilize. Small and medium enterprises (SMEs) depend on the digital medium to access domestic and international market. IAMAI believes that the additional burden of service tax will adversely impact the growth of this sector.

“Five year service tax moratorium as opposed to the stimulus package already put in place by the Government will go a long way in aiding the SME sector to grow and access new markets. It may be noted that SMEs comprises about 40-50 %of the industrial output and any fiscal incentive will help them tap newer markets and use the digital medium better,” opined Dr Ray.

IAMAI made these recommendations in its pre-budget memorandum that was put forth before various ministries, finance, commerce and communications and Information technology.source